Taxman goes to NCU? Seventh-day Adventist university being probed for alleged breaches unearthed during an internal audit
Published:Sunday | November 28, 2010 | 12:00 AM
Tyrone Reid, Sunday Gleaner Reporter
A FINANCIAL audit conducted into the affairs of Northern Caribbean University (NCU) by the United States-based General Conference Auditing Service (GCAS) has reportedly spawned an investigation by government officials from the Taxpayer Audit and Assessment Department (TAAD).
The audit report, released last year but covering transactions for the year ended August 2008, revealed that tax-exempt construction materials bought for the university's nursing school were sold to some employees.
"These materials were tax exempt, and as a result, this poses serious implications for the school and its tax-exempt status," read a section of the GCAS audit report. GCAS is the Seventh-day Adventist Church's preferred provider of auditing or financial-review services.
Based on the audit report, "An interview was conducted with the project manager and he stated that he was not aware of these transactions (sale of goods to workers). We (the auditors) also stated that he was aware of the tax implications."
The auditors recommended that the university's management "ensure that construction materials are not sold to employees, thus avoiding them having to pay valued-added tax".
No comment
In the meantime, Meris Haughton, director of communications at the TAAD, refused to comment on the allegations. "The department is "not at liberty to discuss any specific case," she flatly told The Sunday Gleaner.
President of NCU, Dr Herbert Thompson, said he was not aware of an investigation of the university being carried out by the TAAD.
However, a copy of the audit communication letter GCAS sent to the university's audit-review committee revealed that the university flatly denied the claims made by the auditors regarding the sale of the materials.
The university's management explained that the roof of the original store housing building materials was completely damaged during the passage of Hurricane Dean in 2007. "As a result, the building materials were transferred to the East Campus site and housed with materials for other projects, including the nursing school.
"Over 200 workers were seriously affected. In an attempt to alleviate the burden, the administration, in addition to providing cash grants of $1.2 million, provided assistance with materials - some of which were shopworn - valuing $2.6 million on credit."
According to the university's management, no consideration was given to a tax implication at that time.
It is unclear if the TAAD will throw the book at the institution of higher learning for the breaches that occurred two years ago.
However, a former board member of NCU, in a letter dated June 14, 2010, to Pastor Derek Bignall, president of the West Indies Union Conference and chairman of the NCU Board of Governors, called for the resignation of two of the university's vice-presidents. He noted that the auditors reviewed the evidence of transactions made to facilitate members of the university family who had been affected by the hurricane.
"According to the GCAS official report, officers of the university sold materials to themselves that were bought for the construction of the nursing school," the board member said in defence of the audit findings.
Ex-board member chided
A copy of a letter obtained by The Sunday Gleaner, which was reportedly written by Pastor Bignall in response to the board member's letter, chided the former board member for the manner in which he was attempting to deal with the matter, and asked for apologies to be tendered to Thompson and the West Indies Union Executive Committee.
The alleged sale of the materials was not the only issue the auditors highlighted that had potential implications for the public purse. The auditors also raised concerns about motor-vehicle upkeep being paid to some administrators in contravention of government stipulations. According to the report, the institution received approval from the Jamaican Government to pay a specified amount as motor-vehicle upkeep for employees who own a motor vehicle.
"We noticed that some administrators receive upkeep while driving a vehicle owned by the institution. All expenses related to these vehicles are paid by the institution. If they have the vehicles on a 24-hour basis, the law requires a benefit which is taxable for income taxes. This creates a tax implication for the institution," the report said.
The auditors recommended that the administration stop the payment of upkeep to individuals who use vehicles owned by the institution. "Furthermore, the institution should look into the tax implication of these individuals who have the vehicles on a 24-hour basis," the report added.
The audit communication letter sent to the university's audit-review committee noted that the school's management accepted the recommendation.